IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-01117091.html
   My bibliography  Save this paper

Antitrust Versus Industrial Policies, Entry And Welfare

Author

Listed:
  • Guy Meunier

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

  • Jean-Pierre Ponssard

    (CNRS - Centre National de la Recherche Scientifique, X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

  • Francisco Ruiz-Alizeda

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

Abstract

In industries with large sunk costs, the investment strategy of competing fi rms depends on the regulatory context. We consider ex-ante industrial policies in which the sunk cost may be either taxed or subsidized, and antitrust policies which could be either pro-competitive (leading to divestiture in case of high ex-post pro tability) or lenient (allowing mergers in case of low ex-post pro tability). Through a simple entry game we completely characterize the impact of these policies and examine their associated dynamic trade-off s between the timing of the investment, the ex-post benefi ts for the consumers, and the possible duplication of fixed costs. We find that merger policies are dominated by ex-ante industrial policies, whereas the latter are dominated by divestiture policies only under very special circumstances.

Suggested Citation

  • Guy Meunier & Jean-Pierre Ponssard & Francisco Ruiz-Alizeda, 2015. "Antitrust Versus Industrial Policies, Entry And Welfare," Working Papers hal-01117091, HAL.
    • Handle: RePEc:hal:wpaper:hal-01117091
    Note: View the original document on HAL open archive server: https://hal.science/hal-01117091
    as

    Download full text from publisher

    File URL: https://hal.science/hal-01117091/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mason, Robin & Weeds, Helen, 2013. "Merger policy, entry, and entrepreneurship," European Economic Review, Elsevier, vol. 57(C), pages 23-38.
    2. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
    3. Cabral, Luis M. B., 2004. "Simultaneous entry and welfare," European Economic Review, Elsevier, vol. 48(5), pages 943-957, October.
    4. Hector Perez-Saiz, 2015. "Building new plants or entering by acquisition? Firm heterogeneity and entry barriers in the U.S. cement industry," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 625-649, September.
    5. Levin, Dan & Peck, James, 2003. "To Grab for the Market or to Bide One's Time: A Dynamic Model of Entry," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 536-556, Autumn.
    6. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    7. Meredith Fowlie & Mar Reguant & Stephen P. Ryan, 2016. "Market-Based Emissions Regulation and Industry Dynamics," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 249-302.
    8. Joshua S. Gans & Lars Persson, 2013. "Entrepreneurial commercialization choices and the interaction between IPR and competition policy," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(1), pages 131-151, February.
    9. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 53-82.
    10. repec:reg:rpubli:443 is not listed on IDEAS
    11. Ilya Segal & Michael D. Whinston, 2007. "Antitrust in Innovative Industries," American Economic Review, American Economic Association, vol. 97(5), pages 1703-1730, December.
    12. Rossella Argenziano & Philipp Schmidt-Dengler, 2014. "Clustering In N-Player Preemption Games," Journal of the European Economic Association, European Economic Association, vol. 12(2), pages 368-396, April.
    13. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
    14. Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 383-401.
    15. Stephen P. Ryan, 2012. "The Costs of Environmental Regulation in a Concentrated Industry," Econometrica, Econometric Society, vol. 80(3), pages 1019-1061, May.
    16. Rossella Argenziano & Philipp Schmidt-Dengler, 2014. "Clustering In N-Player Preemption Games," Journal of the European Economic Association, European Economic Association, vol. 12(2), pages 368-396, 04.
    17. repec:esx:essedp:741 is not listed on IDEAS
    18. Qiaowei Shen & J. Miguel Villas-Boas, 2010. "Strategic Entry Before Demand Takes Off," Management Science, INFORMS, vol. 56(8), pages 1259-1271, August.
    19. Kenneth E. Train, 1991. "Optimal Regulation: The Economic Theory of Natural Monopoly," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200848, December.
    20. Gautam Gowrisankaran, 1999. "A Dynamic Model of Endogenous Horizonal Mergers," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 56-83, Spring.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jaunaux, Laure & Lefouili, Yassine & Sand-Zantman, Wilfried, 2017. "Entry and merger policy," Economics Letters, Elsevier, vol. 161(C), pages 124-129.
    2. Boone, J., 2002. "'Be Nice Unless it Pays to Fight' : A New Theory of Price Determination with Implications for Competition Policy," Discussion Paper 2002-23, Tilburg University, Center for Economic Research.
    3. Mason, Robin & Weeds, Helen, 2013. "Merger policy, entry, and entrepreneurship," European Economic Review, Elsevier, vol. 57(C), pages 23-38.
    4. Motta, Massimo & Tarantino, Emanuele, 2021. "The effect of horizontal mergers, when firms compete in prices and investments," International Journal of Industrial Organization, Elsevier, vol. 78(C).
    5. Pavan, Giulia & Pozzi, Andrea & Rovigatti, Gabriele, 2020. "Strategic entry and potential competition: Evidence from compressed gas fuel retail," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    6. Fridolfsson, Sven-Olof & Stennek, Johan, 2005. "Hold-up of anti-competitive mergers," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 753-775, December.
    7. Jeffrey T. Macher & Nathan H. Miller & Matthew Osborne, 2021. "Finding Mr. Schumpeter: technology adoption in the cement industry," RAND Journal of Economics, RAND Corporation, vol. 52(1), pages 78-99, March.
    8. Committee, Nobel Prize, 2014. "Market power and regulation (scientific background)," Nobel Prize in Economics documents 2014-2, Nobel Prize Committee.
    9. Tarantino, Emanuele & Motta, Massimo, 2016. "The Effect of a Merger on Investments," CEPR Discussion Papers 11550, C.E.P.R. Discussion Papers.
    10. C. Lanier Benkard & Przemyslaw Jeziorski & Gabriel Y. Weintraub, 2013. "Oblivious Equilibrium for Concentrated Industries," NBER Working Papers 19307, National Bureau of Economic Research, Inc.
    11. Brett Hollenbeck, 2020. "Horizontal mergers and innovation in concentrated industries," Quantitative Marketing and Economics (QME), Springer, vol. 18(1), pages 1-37, March.
    12. Chen, Jiawei, 2009. "The effects of mergers with dynamic capacity accumulation," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 92-109, January.
    13. Xavier Boutin, 2015. "Mergers and the Dynamics of Innovation," Working Papers ECARES ECARES 2015-15, ULB -- Universite Libre de Bruxelles.
    14. Olivier Bertrand & Katariina Nilsson Hakkala & Pehr‐Johan Norbäck & Lars Persson, 2012. "Should countries block foreign takeovers of R&D champions and promote greenfield entry?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(3), pages 1083-1124, August.
    15. Dockner, Engelbert J. & Gaunersdorfer, Andrea, 2001. "On the profitability of horizontal mergers in industries with dynamic competition," Japan and the World Economy, Elsevier, vol. 13(3), pages 195-216, August.
    16. Yoshifumi Konishi & Nori Tarui, 2015. "Emissions Trading, Firm Heterogeneity, and Intra-industry Reallocations in the Long Run," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(1), pages 1-42.
    17. Chen, J. & Elliott, M. & Koh, A., 2020. "Capability Accumulation and Conglomeratization in the Information Age," Cambridge Working Papers in Economics 2069, Faculty of Economics, University of Cambridge.
    18. Cabolis, C. & Manasakis, C. & Moreno, D. & Petrakis, E., 2021. "The interactions of R&D investments and horizontal mergers," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 507-534.
    19. Sergio Currarini & Marco A. Marini, 2015. "Coalitional Approaches to Collusive Agreements in Oligopoly Games," Manchester School, University of Manchester, vol. 83(3), pages 253-287, June.
    20. Norbäck, Pehr-Johan & Persson, Lars & Tåg, Joacim, 2010. "Buying to Sell: A Theory of Buyouts," Working Paper Series 817, Research Institute of Industrial Economics.

    More about this item

    Keywords

    entry; industry dynamic; antitrust policy; divestiture;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-01117091. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.